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A Numerical General Equilibrium Model with Endogenous Formation of Trading Blocs

Author

Listed:
  • Fisher, Timothy C.G.

    (University of Sydney)

  • Waschik, Robert G.

    (La Trobe University)

Abstract

We are interested in whether Preferential Trade Agreements facilitate attainment of Global Free Trade. Using a numerical general equilibrium model based on global trade data aggregated to 5 regions and 12 goods, we calculate the optimal tariffs in a Nash tariff-setting game when regions are free to form trading blocs. Using Riezman’s (1999) notion of blocking coalitions, we determine endogenously whichtradingbloc structures emerge when regions can form Free Trade Areas or Customs Unions. We nd that Global Free Trade may not be an equilibrium outcome unless constraints are placed on the way Customs Unions set their Common External Tariffs.

Suggested Citation

  • Fisher, Timothy C.G. & Waschik, Robert G., 2006. "A Numerical General Equilibrium Model with Endogenous Formation of Trading Blocs," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 881-914.
    • Handle: RePEc:ris:integr:0382
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    Cited by:

    1. James A. Giesecke & Nhi H. Tran & Robert Waschik, 2021. "Should Australia be concerned by Beijing’s trade threats: modelling the economic costs of a restriction on imports of Australian coal," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(1), pages 1-22, January.

    More about this item

    Keywords

    Endogenous coalition formation; Preferential trade agreements;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration

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